The technology industry will start to revive around the middle of this year, market researcher IDC predicted in a new report, driven in part by growth in China and a continued push for security software and services.

John Gantz, chief research officer for IDC, laid out his top 10 predictions for the New Year in the report, released Thursday.

Overall, he predicted information-technology spending would increase from 4 percent to 6 percent in the United States for the year, 6 percent to 7 percent in Western Europe and 10 percent to 12 percent in the Asia-Pacific region.

While far from the robust growth of the Internet's boom years, the predictions are still an improvement from the modest declines most researchers expect when total IT spending is tallied for 2001.

Prime drivers for IT growth this year include China's recent entry into the World Trade Organization, Gantz said, predicting the country will experience 25 percent growth in IT spending over the next few years.

"Over time we expect them to buy more software, but it's mostly a hardware economy now," Gantz said in an interview. In the meantime, the country will be spending money on services.

Gantz also predicted that spending on security software and services will remain strong following the Sept. 11 attacks on the United States, with the push moving from add-on software to products with integral security features.

"Companies will rethink the very nature of what it means to be secure, and
that will create a second wave of security spending," he said. "We think a lot of security functions will get embedded in hardware and core applications."

What awaits Microsoft?
Gantz also had specific predictions for Microsoft. He said the software giant's Passport push, along with a rival project spearheaded by Sun Microsystems, will increase acceptance of online authentication systems, "even if a single sign-on to the Web will remain a consumer's pipe dream."

The hype over Web services, epitomized by Microsoft's .Net initiative, will peak in 2002, Gantz predicted, but compelling products and services are some years off. "The hype curve and the reality curve are still pretty far apart there," he said.

And Windows XP, the new version of Microsoft's omnipresent operating system, will make significant gains during the year, with Microsoft selling 75 million licenses for the software. But the new OS won't do much to spur PC upgrades or pull in new users, as many in the ailing PC industry had hoped.

"We don't think companies are going to be upgrading specifically to get XP," Gantz said.

Gantz also sees a "breakout" year for Linux. After surviving one of the toughest years in computing history, the upstart open-source operating system has proven itself to be a viable part of the corporate computing scene. Linux has gained significant market share in business uses such as serving Web pages, but has had little impact on the desktop.

As with last year, space-saving " bladed" designs will be the big news in the server market, Gantz said, shaking up established server leaders and allowing room for a few blade-focused start-ups to succeed.

Gantz also predicted strong growth in streaming media devices and foresaw a growing need for IT specialists who can integrate existing corporate data systems with the mobile phones, e-mail devices and other items from the ongoing wireless boom.